HMRC reminder to use the off-payroll working indicator

27 April 2022

Her Majesty’s Revenue and Customs (HMRC) is reminding those operating payroll software to make sure they are using the ‘off-payroll’ indicator properly.

Payroll software should include an indicator to enable organisations operating payroll to notify HMRC of any engagements being paid which are subject to the off-payroll working rules (IR35). This is likely to be named the ‘off-payroll worker subject to the rules’ indicator.

It is mandatory to use this indicator for engagements determined to be inside the off-payroll working rules. It is only to be used by the deemed employer, who is the party in the chain with responsibility for deducting Income Tax and National Insurance contributions on payments being made to a contractor's own limited company (often known as a personal service company of PSC), or other intermediary, as part of the off-payroll working rules (IR35). The deemed employer could be a medium or large sized non-public sector client organisation, a public sector client organisation of any size, or an agency.

The indicator is not to be used for any payments made which are not subject to the off-payroll working rules (IR35), for example, payments made to contractors working as sole traders. It is also not to be used by a contractor's own limited company. 

If you have used this indicator incorrectly, or haven't used it when you should have done, HMRC is encouraging organisations to amend this urgently on a corrective full payment submission for the relevant period.

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